I'm often asked what's the ideal leverage ratio for futures contracts? I think before answering this question, I need to first understand the essence of futures contracts.

The essence of futures contracts is to use leverage to amplify your cognitive advantages—unfortunately, most people amplify weaknesses rather than advantages.

I recently saw a point of view about some people who only trade one way, for example, blindly going long when the market is rising and blindly going short when it's falling. The problem with this is that the market doesn't always move in one direction, especially during range-bound trading, where a one-sided approach can easily be eroded. Instead of focusing on just one direction, it's better to switch flexibly and be bold in both long and short positions.

The most common mistake in short-term futures trading is focusing on one direction only. Some people only go long because "the market will always rise in the long run"; others only go short because "falls are faster and more satisfying." Applying this mindset to futures contracts is self-defeating—you're only using half of the potential to profit from a tool that can profit both in rising and falling markets. Especially during range-bound trading, this one-sided focus is simply giving money to the trading platform.

Let's assume the daily fluctuation range of the futures market is 3% or even 5% each way. Focusing only on one direction is effectively giving up half of your profit opportunities. True short-term traders focus solely on volatility, not emotion—regardless of whether they're long or short, as long as the price moves, there's profit to be made.

Many contracts go bust not because they misjudged the direction, but because they completely lost control of their position management. Leverage is so high that their heartbeats race with the candlestick charts. Either a single pullback wipes out everything, or their positions are so small that even a win feels like nothing. The key to trading isn't opening trades daily, but rather being bold when opportunities arise and patient when they don't. It's better to wait a long time than to go all-in on a trade you're unsure of.

The essence of short-term contracts can be summed up in two words: lightness and decisiveness. Lightness is the breath of your position, giving you room to maneuver; decisiveness is the sharp edge of your stop-loss and take-profit decisions, executed decisively and without emotion. If you can ingrain these two principles into your trading habits, contracts are no longer a casino, but a tool for you to play fair with the market.

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